NZGBS: Subdued Open, Still Digesting RBNZ Decision

NZGBs open 1-2bp richer today with the local market still digesting the surprise 50bp hike from the RBNZ yesterday. Meanwhile, US Tsys closed stronger but were well off NY session bests sparked by misses from ADP Employment and ISM Services. After the bell, US Tsy 2-year yield was 5bp lower at 3.78% after making a low of 3.64% earlier in the session. US 10-year yield closed down 3bp at 3.31%.

• Swap rates open 3-5bp lower, implying slightly narrower swap spreads.
• After shunting 20bp higher across meetings yesterday, RBNZ dated OIS opens little changed with 20bp of tightening priced for the May meeting. 38bp of easing is priced for Feb-24 off a terminal OCR expectation of 5.49%.
• Most economists expect another 25bp hike in May after RBNZ looked through Q4 GDP weakness at yesterday's meeting to persistently high inflation, demand still outstripping demand and the impact on inflation expectations from the cyclone recovery. Lower wholesale rates appeared to also weigh on the decision.
• The local calendar is light today with ANZ Commodity Prices (Mar) as the highlight.
• The NZ Treasury is scheduled to sell NZ$200mn of the 0.5% 15 May 2026 bond, NZ$150mn of the 4.25% 15 May 2034 bond and NZ$50mn of the 1.75% 15 May 2041 bond.